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10 signs that programmatic advertising is reaching maturity

If you read the press you'd be forgiven for thinking programmatic advertising is in decline.

But for all the noise about brand safety, viewability, fraud and kickbacks – programmatic is maturing fast. A range of new technologies and initiatives have got many in the industry hopeful that 2018 could be a big year for programmatic.

After all, emarketer predicts that 81.5% of digital display spend will be programmatic next year.

So, what is happening in the programmatic world that gives some such cause for optimism? To find out, I caught up with Joel Livesey, director of partnerships, EMEA at The Trade Desk.

1. Ads.txt adoption hits c.25%

Ads.txt is a file hosted by publishers which publicly states who is authorised to sell their ad inventory. The 'ads' stands for authorized digital sellers.

The Trade Desk is one of the demand-side platforms (DSPs) that is honouring the ads.txt file, as of November 15th this year.

Livesey tells me that means if a publisher hosts an ads.txt file on their site saying "who they work directly with, whether they are a direct buyer or an approved reseller of their inventory, any agency that logs in to The Trade Desk platform will only be able to buy through those people listed in the file."

The analogy he gives is logging on to eBay to buy a pair of Nike or Adidas trainers. You would probably buy them through the brand's eBay store, rather than from an individual seller, "because you want to make sure you are buying a verified product from an approved source."

As far as how common ads.txt is, Livesey says "We’ve reached a tipping point globally, from what we’ve seen we're at 25% adoption amongst publishers. So we’re now at stage where we’re happy to give our clients the opportunity to do this."

Ads.txt is part of supply path optimisation (SPO), "a big buzzword at a lot of conferences," according to Livesey. The aim is to work with suppliers that have direct relationships with publishers and to avoid those who are adding little value to the supply path.

As ads.txt penetration increases, Livesey expects "a contraction of the number of SSPs (supply-side platforms)", i.e. a consolidation of inventory sources.

It turns out header bidding is some JavaScript that allows buyers and ad exchanges to submit their bids before page load, hence before the ad server is called. This means a higher price can be achieved than with a more opaque waterfall process.

But rather than understanding exactly how it works, let's look at the benefits of header bidding.

Firstly, the publishers can let the open exchange beat a direct-sold impression. Livesey says "We’re able to compete against those direct deals. And therefore an agency/client can use programmatic to compete and to pick and choose the impressions they want from all impressions on a publisher."

"For a publisher that’s super important because you can sell each impression for more you could before, and for a buyer it’s important because you get visiblility of everyone of the publishers impressions rather than just the ones that made it into programmatic realm."

Intriguingly this also has implications for the creative side of programmatic.

One of the creative possibilities that perhaps hasn't been used as well as it should have been is storytelling through successive impressions using dynamic creative optimisation (DCO).

Livesey explains, "So the first time somebody sees an ad they’ll see one ad, the second and third ad will be slightly different. It’s always been feasible but because programmatic itself was a small chunk of the impressions you saw on a publisher it wasn’t always possible.

"Header bidding means that our client can see the first impression for the first user on a lot of publishers. Whereas the waterfall before meant we saw what we saw, now we see every impression and we can tell that story and get the most valuable impression for that publisher."

Livesey that contends that header bidding on the whole has led to clients investing more in programmatic and taking a more hands on approach.

3. A common-sense approach to personalisation and storytelling

Whilst we're on the topic of storytelling, it's worthwhile touching on personalisation in advertising. Some of the excitement about programmatic in years gone by has been about personalisation, but this has often stemmed from a fetishisation of the technology i.e. doing something with ad creative because it was possible, not because it might be effective.

The apotheosis of this was Axe's Romeo Reboot campaign which used 100,000 possible versions of a movie, with a consumer's particular interests dictating which creative they would see. Though this campaign raised a lot of eyebrows, the feeling now seems to be that traditional advertising acumen and common-sense has to be applied, too.

Livesey says "you don’t want to be too personal, there’s an inefficiency involved - if you’re selling shampoo or trainers, being too personal is a waste of your time, because everyone has hair or lives with someone who has hair.

"If you’re selling Bentleys, it makes sense. But you can’t personalise too much outside of email without freaking out the user."

"Advertisers will tailor things," Livesey continues, "change a few colours, maybe the actual image they show to the user, but [not to the nth degree]."

Put simply, Livesey says, "you don't need 60 million versions of creative to cover the UK population. People are using much more high impact formats within our platform, the likes of Sublime skinz, Inskin, Undertone, all of these guys are being used much more heavily than they ever have been and there are stats out there to show the use of rich formats that are high impact."

Right now, the vast majority of programmatic is traded in a second price auction. This is the same principle that applies to an eBay auction – the winning bidder will pay the second-highest bid price.

But SSPs don't always let ad buyers know what type of auction they are participating in, which means thpse ad buyers can be squeezed for money if they think they're in a second price auction but aren't.

Some SSPs are changing their practices on this front, and first price auctions are being seen more often, which Livesey argues is "going to be a really good thing". Though some contend that first price auctions will lead successful bidders to lower their bids next time out, and perhaps remnant inventory will be harder to shift for publishers, there are big up sides, too.

Chiefly, Livesey hopes "it means we’ll see fair pricing come in. For agencies, they’ll be able to pay the price they want to for that inventory, as long as they can get it for that price, it means we’re hitting a mature stage, and equal power in how we’re negotiating and paying rates.

"I don’t think it’s a crazy idea for people to get their heads round. When I go shopping, I pay first price, so it’s not going to be a revolution. If you have premium inventory, you’re going to be able to start pricing it in the way that’s right for that inventory.

"To begin with there’ll be a bit of a supply and demand variation - I’m sure some publishers will come in at £10 [for example] when the market rate is £7 or £8, and they’ll have to start lowering their rate, because they’ll see demand go down. Or they’ll come in at £3 when they should be £7 or £8, and they’ll be able to start pushing their price up slowly.

This is the key point, DSPs will start to account for the market value of inventory in order to successfully bid at the right price, though only if SSPs all begin to clean up their act.

5. Cross-device solutions more widely used (and more channels available)

"Cross-device solutions are becoming more widely used by our agencies mandated by end client themselves," says Livesey.

"People are using cross-device to join all their different media channels together, as they want to see what impact they have on each other. Whereas before you might have used some sort of econometric modelling, now you can directly track the impact of one medium on the other. And it's growing in terms of adoption," he adds.

This cross-device measurement is enabled either by deterministic matching (e.g. via Facebook logins from different devices) or by probabilistic matching, a less accurate but sophisticated method which analyses many data points in order to make a good guess that two devices are used by the same person.

Livesey also makes the important point that "more and more channels are open to programmatic. Audio, web, mobile app, mobile web, connected TV. So you can tell a story on all of those platforms. You can see them on Spotify and then retarget them on TV, for example.

“Programmatic doesn’t mean necessarily all the same variables on every device," Livesey is careful to add, "because there are limitations on what the device can offer. But it means buying it in an automated fashion."

6. Common-sense metrics

"Hopefully people are moving away from CTR as the sole objective," says Livesey. "Things like viewablity are moving from being an objective to being a minimum standard, which is what it should be. You should just have a baseline viewability score you are aiming to hit – most clients have that now."

7. A crackdown on ad fraud

The Trade Desk has partnered with White Ops to scan every biddable ad impression in real-time, using servers and data centers in North America, Europe and Asia.

When a non-human impression or 'sophisticated invalid traffic (SIVT)', is identified by White Ops, The Trade Desk will block that impression from serving. The intent is this technology will be applied to every impression The Trade Desk bids on that runs through White Ops, on a global basis.

Livesey tells me that the aim is to "scan every single impression pre-bid for non-human traffic, and partnering with all our SSPs to make sure that happens at the SSP level, and is available to all of our buyers."

8. Bid factors can let agencies focus on strategy

Admittedly, bid factors are a specific feature of The Trade Desk's platform, but as I've been talking to Joel Livesey, it seems only fair to mention them.

Bid factors allow an advertiser to multiply a base bid by a certain percentage in order to increase win rates. These factors can be related to audience, inventory type, time etc.

Livesey explains how they make bidding quicker and easier, as opposed to traditional media buying through line items. "With line items, every targeting variable you have, you would have a different line item, and every different combination of those you need a different line item in most DSPs."

"For example, 'Men 18-34' is one line item. 'Women 18-34' is a different line item. Each of those in the morning, two more line items. So you end up with hundreds of line items, with most traders spending a lot of their time moving budgets between line items, rather than optimising."

"With The Trade Desk’s architecture you have one mega line item – an ad group. Within that group each of those variables is a bid factor or a bid multiplier. So if you start with a dollar CPM as a base bid, if, say 18-34 year olds are important then multiple that by 1.8. If men are important but not quite as important as that age range, multiple it by 1.6. If time of day is more important, multiply by 2, and so on."

"So where 24 line items were needed, four bid factors can do the same job. I liken it to sliders on a mixing desk."

9. Transparency is the next big push

As clients because spend a higher percentage of their online ad budgets on programmatic, they’re pushing for transparency. Both client and publisher want to know where every dollar is going. "It's the next big push," says Livesey.

Ads.txt, White Ops, the declaring of first and second price auctions mid-stream – all of these factors increase transparency and build towards a future where advertisers can see what every player is adding to what they're buying.

"It's about a focus on value rather than price" says Livesey.

10. Client knowledge is improving

Though there has been much talk about clients bringing programmatic in house, Livesey contends that they are actually bringing in "experts in programmatic who can ask all the right questions and make sure they’re scrutinising what is happening [at their agency] more and more."

"Clients are getting more involved with programmatic... and knowledge is becoming normal." Of course this is vital if brands are to understand white lists, ad formats, bidding strategy, fraud, cross-device and attribution.

In summary

Amidst all the heated debate about viewability, the noise from FMCG clients reeling in their spend for a while, the talk about more direct buys – it seems 2018 could in fact be a big year for programmatic.

Work in the industry or in charge of an ad budget? Let us know what you think in the comments below.

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Comments (3)

Dennis Kibirev, Brand & Content Marketing Manager at Bench

Great article, Ben!

Bench is an official endorser of the ads.txt initiative as we believe that it will greatly help, not just users of our platform, but the programmatic industry in general fight ad fraud and achieve greater transparency.

You're right to point out that client knowledge of the technology is improving, however many marketers still don't know how ads.txt can help their brand. To help, we created an infographic, which simply and visually shows what ads.txt is about:

We hope your readers will find this a useful addition to your informative update.

Dennis

4 months ago

Chris Turner, Owner and Principal at Bright Blue Kite

I'm delighted transparency is the next big push because I'm a pretty sophisticated digital marketer and I don't understand half of what's being said here! I don't know how a client offered a programmatic opportunity would be able to make an informed decision about what to do.

When people are not experts, they tend to hold the 'received' view and I think programmatic needs to address the fraud, transparency, environmental and attribution issues before it can have a 'big year'.

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